Next year's economy: help wanted

ByDavid Fouquet, Special to The Christian Science MonitorDecember 24, 1982

But if forecasts by some leading Europe-based international organizations are to be believed, the world will have to grapple next year with a far more persistent and damaging slump than had been expected.

The unusually somber year-end predictions are unanimous in noting that a recovery anticipated for late 1982 has failed to materialize - and that unemployment will swell dramatically in Western Europe over the next two years.

Issuing such bleak outlooks have been the Organization for Economic Cooperation and Development (OECD) in Paris, the European Economic Community (EEC) in Brussels, various United Nations agencies, and several banks.

A number of US-based forecasters are less pessimistic. They note that most industrial nations have already switched from fighting inflation through austerity to more expansionist policies in an attempt to create jobs. And they see possibilities for some modest growth getting started in 1983 and onward.

But many European officials are deeply concerned by the outlook. They also expressed anxiety that deteriorating economic conditions could lead to political and social instability in both Western and Eastern Europe and in the developing world. The cumulative effect of prolonged slump may also lead to severe strains in international as well as domestic relations, they say.

Perhaps the most gloomy forecast is the one issued by the OECD Dec. 23. It anticipates an increase of more than 4 million unemployed in the coming two years in its 24 member countries in the industrialized world. The hardest hit region, according to the report, will be Western Europe, where unemployment is expected to spurt from the current 16.2 million to 19.5 million by 1984.

Underlining the severity of such forecasts, figures just released by the EEC here show that the sharpest rises in unemployment have been registered in recent months in West Germany and the Netherlands, formerly considered more stable economies capable of performing as ''locomotives'' pulling their neighbors out of the doldrums.

At various times similar leading economic roles have been seen for the US, the oil-producing countries, and the developing world. These were expected to serve as magnets for exports from other countries. But the combined effects of anti-inflation high interest rate policies, slumping oil revenues, and credit crises have significantly reduced the capacity of all these countries to expand their economies.

Western Europe had been expecting improved exports to the US, the oil-producing Arab countries, and developing-world markets to continue to provide outlets for their industrial goods. It is this purchasing power which has failed to materialize in recent months, plunging Western Europe into further recession.

The OECD document puts part of the blame on ''the simultaneous pursuit by many countries of tight money policies'' and a resurgence of protectionist policies.

This report and others foresee modest improvement for the US and Japanese economies. But it notes that the rising payments deficit in the US may discourage imports. On the other hand, it sees the Japanese economy as being ''at or near a watershed.'' There are signs that Japan's emphasis on exports could be slowing down while domestic demand is being stimulated, giving some hope to reduced world pressure from Japanese products.

Both the OECD and EEC reports regard conditions in Western Europe as grim. An increase in young people coming on the job market - at a time when European industries are seen as uncompetitive and investment and public budgets are tightly squeezed - signal worsening unemployment.

Up to now, generous unemployment insurance plans have succeeded in keeping the lid on social unrest in most West European countries. European leaders are worried, however, about the lack of funds to finance the costs of the expected increase in out of work youths. While a number of remedies have been discussed, few offer more than limited capacity to provide jobs or reduce the massive layoffs of workers of recent years.

EEC leaders meeting at their regular summit in Copenhagen recently discussed plans for channeling investments into emerging high-technology industries, reduction of the number of hours worked by employees, and special training or job schemes for young people. The EEC is also studying the possibility of setting employment quotas for young people and different age-related salary scales to improve the prospects for young workers, who now represent about 40 percent of the record unemployment levels in the EEC.

Another approach gaining favor with the EEC and the UN's International Labor Organization (ILO) is the possibility of increased part-time jobs and a shift of work patterns to create two half-time jobs instead of one full-time occupation.

But analysts here say that national political and economic differences make it unlikely that such plans can be fully implemented or bring about significant improvements.

Solid economic growth is seen as the only way out. But the OECD forecast sees only the US, Japan, and Canada achieving 3.5 to 4 percent expansion in the next two years while the rest of the industrialized world stagnates between 1 and 2 percent - a rate incapable of preventing an increase in unemployment in the advanced nations from the current 30.2 million to nearly 35 million by 1984.